AT&T MAY GO PUBLIC
WITH AOLTW STOCK

The Wall Street Journal Tuesday (2/27) reports that, while the two sides had made substantial progress on a deal in the past few weeks following months of on-and-off again negotiations, AT&T may now walk away from the $9-$10 billion buyout.

At issue, the Journal says, is that AOL is also looking for several side agreements related to cable systems, Internet access and programming to be included as part of a "bundled" deal. AT&T, which had hoped to sign a deal by now, is balking at AOL Time Warner's demands.

The two sides continue to negotiate but remain far apart on the valuation for these accords, the paper says. AT&T's primary leverage in the negotiations is its right to register its TWE stake for sale in a public offering; it has a 60-day window every 18 months to register at least part of its stake for sale. The current window ends Wednesday (2/28), and AT&T is expected to register its stake before then.

The Wall Street Journal, citing people close to the situation, cautions that an IPO of the TWE stake isn't likely to occur, even if AT&T does exercise its rights. But triggering the registration rights means the two sides have to hire an investment banker to value AT&T's stake in TWE. AT&T, which must sell the stake for regulatory reasons, believes it has a right to force AOL to pay the appraised value—though AOL doesn't believe it can be forced to buy the stake in this situation.

If the two sides quickly resolve their differences, AT&T and AOL could agree to extend the deadline.

Meanwhile, Dale Hatfield, a former top Federal Communications Commission official, was appointed on Monday (2/26) to monitor AOL Time Warner's compliance with conditions attached to its mega-merger last year.

We at HITS are still unsure if this story is of any importance but since the Journal played it up, we figured what the hell.